Sought: middle ground

Like many middle-class families, Chris and Truc Le patiently waited two years for the Southern California housing market to cool. They didn’t like paying $2,000 a month in rent to live in Irvine, yet didn’t want to raise their two children anywhere else. But with median home prices in Orange County well above the half-million-dollar mark, the one-income family had little choice.

Even with his salary of $75,000 a year as an accountant in Corona, Chris Le said, “there was no way for my wife to stay home with the children and for us to be able to afford a home in the area.”

Then, through an online search, Le learned about homes being built by Irvine-based John Laing Homes Corp., one of a growing number of developers looking to fill the chasm between housing production and population growth through what is called “workforce housing” targeted at middle-income earners.

Although state law requires cities to plan for and provide affordable housing for low-income households, they are not required to build mid-priced housing. But with a dwindling supply of buildable space, increased demand for homes priced for middle-class budgets and economic incentives, more builders are giving this market a closer look and allocating some of their new homes to middle-class families who want to live near their work.

The concept is not new. Universities, for example, have long offered more affordable for-sale housing to recruit and retain staff and professors. Rather than target a specific career field, however, the recent trend in workforce housing is focused on building homes for households earning 80% to 120% of an area’s median income.

The minimum household income needed to purchase a median-priced home in most areas of Los Angeles County was more than $106,000 in September, according to California Assn. of Realtors statistics. By comparison, the minimum household income needed to purchase a median-priced home in Orange County was nearly $147,000.

“That means people earning between $60,000 and $120,000, which is most of the working and middle class, can’t afford to buy a house,” said William Fulton, president of Solimar Research Group Inc., a Ventura-based research and consulting firm specializing in land-use and growth patterns. The area median income for a family of four in L.A. County, according to the Los Angeles Housing Department, is $59,500. For an individual, it’s $41,650.

State and local governments are doing their part by dangling incentives to builders who incorporate price-reduced homes for middle-income earners into new and redevelopment projects.

For example, at John Laing Homes’ Tustin Field development -- a 30-acre mix of 367 detached and attached single-family homes and townhouses under construction at the former Tustin Marine Corps Air Station -- city subsidies enabled the developer to buy the land at a reduced price, and, in exchange, the builder will pass those savings on to a select number of middle-income buyers.

Le completed a buyer information and interest form available at the developer’s website and received an invitation to an open house in April.

While some developers use a lottery drawing, John Laing Homes selected qualified buyers on a first-come, first-served basis. More than 5,000 buyers from all income levels showed interest in the new homes. And based on factors such as income and family size, Le qualified to buy one of 140 townhouses -- 55% of which were set aside for moderate-income buyers -- for $299,000.

“Similar units were selling for about $515,000,” said Le, whose three-bedroom home should be completed in April. “I was surprised that we got it.”

Like Le, Andres Basurto didn’t expect to qualify for one of eight new homes built in the city of Commerce by the Lee Group, a Marina del Rey-based developer of workforce housing.

Nevertheless, Basurto, who learned about the homes through a co-worker, contacted the sales team and got on a waiting list in December 2003. In October, Basurto, a construction worker who earns about $70,000 annually, paid $270,000 for a 1,800-square-foot, four-bedroom, 2 1/2 -bathroom home at the Vista Del Rio community. Similar homes in the area are selling for $339,000.

“I wanted a better place for my family and a better place for my kids to go to school,” said Basurto, who moved from South Los Angeles. “I feel like I got a really good deal.”

Unlike traditional suburban developments that average about six to 12 units per acre, a typical workforce housing development averages 25 to 40 units per acre, said Barry Curtis, principal planner for the city of Irvine. And prices average between $200,000 and $400,000.

John Laing Homes’ Boulevard development in Anaheim, for instance, has about 16 units per acre. The mixed-income community combines 20 single-family market-rate homes in the high $400,000s with 36 income-restricted townhomes priced from $275,000 to $341,000. Available to middle-income families, the townhomes range from 1,370 square feet to 1,870 square feet and are scheduled for completion early next year.

Without such options, experts caution that teachers, firefighters, police officers, nurses and other critical industry workers who are unable to buy or rent in the communities they serve will move away and take valuable social and economic resources with them.

In Santa Barbara, for example, Fulton said middle-class workers who can’t afford a million-dollar home might choose to pay $650,000 for a home in Ventura County.

But workforce housing is not without drawbacks. Deed restrictions safeguard against speculative buying. Most programs limit appreciation by requiring resale to moderate-income buyers for select periods and stipulating that buyers live in the homes for certain time frames before resale.

A Tustin Field applicant, for instance, cannot own any other residential property at the time of application and at close of escrow. And Brookfield Homes Southland Inc.’s Cantada Square -- a mixed-income development in Anaheim -- imposes resale restrictions that favor moderate-income buyers for 45 years. After that period, the homes revert to market value. Cantada Square will offer 32 townhomes from $279,000 to $325,000 and nine single-family homes at $395,000 for workforce families in 2005.

“It’s not a long-term investment,” Le said, “because the house doesn’t grow with the market.”

Workforce housing is, however, a good option for families looking for long-term ownership or renters wanting to buy now and then later purchase a traditional home.

Still, critics argue that these types of equity-suppression programs are hard to administer, citing cases in which participant homeowners have been able to refinance at market rate prices and circumvent deed restrictions.

Moreover, real estate agents say catering to widely disparate income levels and prices can raise tough questions at sale time or create resentment among neighbors. Abel Avalos, land acquisition manager for John Laing Homes, agrees.

“It’s always a challenge when people find out that they’re paying market rate for a home and right next door to them is an ‘affordable home buyer,’ ” Avalos said.

Unfortunately, Le said, some people equate workforce housing with low-income housing. “But it’s not. I don’t consider my family low income.”

Part of that misconception may come from preconceived ideas about redevelopment sites associated with urban areas and a not-in-my-backyard attitude from residents in established communities.

“But quite frankly, there’s nowhere else to go,” said Curtis. “So we have to think about how we can coexist. And the way to do that is to think about how to introduce new resources, new designs and new strategies for making these areas that were once undesirable functional.”

Converting vacant strip malls and obsolete factories into urban villages and residential communities is not always easy. Troubling issues crop up such as environmental contamination and cleanup costs, regulatory challenges and neighborhood opposition to increased densities, traffic and parking problems. Builders usually find there’s a reason why available land in urban communities sits undeveloped.

Recognizing these challenges, local and state governments are encouraging developers to deliver affordable units along with traditional market units through regulatory incentives such as fee waivers, reduced parking requirements, modified zoning, expedited permitting, tax credits and funding options, inclusionary zoning provisions (requiring developers to set aside a predetermined percentage of units for affordable housing) and density bonus programs.

The city of Santa Monica’s inclusionary housing program, one of many similar provisions adopted throughout California, requires that 30% of multifamily residential developments be affordable to and occupied by low- and moderate-income households.

And while Los Angeles is considering a similar statute, the city currently offers a 35% density bonus to developers who build within 1,500 feet of a major transit hub, university campus or economic activity center. Density bonuses enable developers to build more units than would normally be allowed, limit urban sprawl and increase the potential for profit. So a 100-unit condominium building with a 35% density bonus, for example, could include 35 additional units.

For years, an abandoned furniture factory in the northeast Los Angeles community of Lincoln Heights sat boarded up. But Percival Vaz, president of Amcal Multi-Housing Inc., a Westlake-based affordable-housing developer, looked beyond the 7-acre eyesore and saw an opportunity to convert the former industrial site into a transit-oriented urban village.

Known as the Avenue 26 Condominiums, the four-phase multi-use development will feature workforce condominiums, a senior center, a child-care center and a retail site.

Avenue 26 broke ground in June and sits adjacent to the southeast side of the Avenue 26 Metro Gold Line station. The light-rail system runs between downtown Los Angeles and east Pasadena. The 165 units range in size from 700 square feet to 1,800 square feet, have one to three bedrooms and are priced from $210,000 to $375,000.

The project is being built by community-based developer Phoenix Realty Group, a private real estate company selected to oversee the $100-million Genesis Workforce Housing Fund, the nation’s first workforce investment fund backed by institutional investors such as Washington Mutual.

Genesis is not the only private equity fund looking to tap the workforce-housing niche.

With financial support from several member banks, Glendale’s California Community Reinvestment Corp., a nonprofit founded in 1989 by commercial banks to finance low-income housing in California, expects to have about $44 million to invest in workforce-housing projects by April.

The developer of Avenue 26 is marketing 15% of the units to buyers earning 80% to 200% of the area’s median income and expects to complete the project by early 2006.

“For people to buy housing at the pricing we plan to sell these units for, they would have to travel great distances from Los Angeles, possibly spend three hours on the freeway and move to Riverside, San Bernardino, Palmdale or Lancaster,” Vaz said. “And that’s an enormous waste of time and energy.”

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Where to find workforce housing

For more information about the availability of for-sale workforce housing or to sign up to be on an interest list and receive online updates, contact these Southland developments.

In Los Angeles County:

* Avenue 26 Condominiums in Lincoln Heights: www.ave26.com, (323) 262-6636.

* Fuller Lofts in Lincoln Heights: www.livableplaces.org/development/lincolnheights.html,

(213) 622-5980.

* Irvine Byrne Building Lofts in downtown Los Angeles: www.urbanpacific.com, or e-mail info@urbanpacific.com.

* Marlton Square in the Crenshaw district in South Los Angeles: www.leehomes.net /home/contacts/contacts.html, (310) 827-0171.

* Olive Court in Long Beach: www.olivecourt.com, (866) 654-3300.

* Vista Del Rio in the cities of Bell Gardens and Commerce: www.leehomes.net/home/contacts/contacts.html, (310) 827-0171.

In Orange County:

* Cantada Square in Anaheim: www.brookfieldsouthland.com, (800) 571-1656 or (877) 314-6637.

* John Laing Homes in Orange County: www.johnlainghomes.com/orangecounty

(select the Boulevard in Anaheim or one of the Tustin Field developments), (949) 476-9090.

In Ventura County:

* Cabrillo Economic Development Corp.’s Monte Vista Homes in Moorpark: (805) 991-3141, www.cabrilloedc.org or e-mail info@cabrilloedc.org.

* Cabrillo Economic Development Corp.’s Kuehner Homes in Simi Valley: (805) 659-3791, www.cabrilloedc.org /kuehner.html or e-mail info@cabrilloedc.org.

* For future Cabrillo workforce-housing projects, call (805) 659-3791.

In San Diego County:

* The Centre City Development Corp. features information about affordable rental housing and for-sale workforce housing in downtown San Diego. Visit www.ccdc.com and select the Affordable Housing Directory or call (619) 235-2200.

-- Michelle Hofmann

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Michelle Hofmann is a Los Angeles freelance writer. She can be reached at michellehofmann@earthlink.net.

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September affordability index

The percentage of households earning enough to buy a median-priced existing single-family home.

Median Minimum Monthly Afford. Afford. County home price income payment* index a year ago

Los Angeles $459,660 $106,516 $2,663 17 24 Orange 633,340 146,763 3,669 13 18 San Diego 573,080 132,799 3,320 11 17 Riverside 346,866 80,379 2,009 18 32 San Bernardino 279,557 64,781 1,620 28 42 Ventura 613,200 142,096 3,552 16 22

*Based on a 30-year mortgage with an average rate of 5.7% and 20% down payment; includes principal, interest, taxes and insurance.

Source: California Assn. of Realtors